Loss of iPhone exclusivity will cause 'rocky' time for AT&T, CEO says

Still, AT&T sold 4.1 million Apple iPhones in fourth quarter even after it was clear Verizon was coming

AT&T's loss of its exclusive hold on Apple's iPhone will make early 2011 "rocky, volatile and hard to predict" for the carrier, CEO Randall Stephenson said in a conference call with analysts on Thursday.

Verizon Wireless will start selling the iPhone on Feb. 10.

However, Stephenson said AT&T is "fairly confident we will grow through the disruption." He pointed to AT&T's activations of 4.1 million iPhones in the fourth quarter of 2010 as a sign of the company's strength.

The iPhone "is still strong, and we had one of the best quarters ever," he noted, even though it became evident during that quarter that AT&T had only a short time left as the sole U.S. carrier offering the iPhone. "We sold [more than] 4 million."

Stephenson twice articulated uncertainty about AT&T's prospects in the coming months. "It may be rocky, volatile and hard to predict, but as the market stabilizes, we will work through it," he said the second time.

Despite the uncertain outlook, AT&T experienced its biggest increase ever in wireless subscribers in the fourth quarter and for all of 2010, Stephenson noted. The carrier now has 95.5 million wireless customers, compared with 94.1 million for Verizon Wireless.

Some analysts have predicted that AT&T could lose 10% or more of its iPhone subscribers to Verizon. However, Stephenson indicated that AT&T's iPhone sales could still grow. "We feel with a little volatility, we can grow... contract subscribers this year," he added.

As 2011 moves along, Stephenson said AT&T expects to increase sales of its Windows Phone 7, BlackBerry and Android devices. "We have not been very aggressive with the Android portion [of the wireless device market]," he said. "We will be a heavy participant in the Android market this year."

Moreover, AT&T is planning a midyear activation of an LTE network on top of HSPA+ network capabilities, with speeds of 6Mbit/sec., Stephenson noted. "We feel good about the network situation," he added.

AT&T Chief Financial Officer Rick Lindner tempered Stephenson's remarks over the loss of the carrier's exclusive iPhone deal. "There is probably a little more volatility this year and certainly in the first half," he said. "We are seeing continued strong iPhone sales, despite the anticipation [of Verizon selling it]."

The 4.1 million iPhone sales in the fourth quarter brought AT&T's total iPhone sales for the second half of 2010 to 9 million, Lindner pointed out. "That's a pretty phenomenal number if you think about it," he said.

Lindner said AT&T assumes that sales of all smartphones will be strong in 2011. "We'll have a tremendous device portfolio for customers," he said. AT&T even expects to have success with sales of iPhone 3G devices, which will go for $49, he added.

Lindner pointed out that AT&T saw its second-highest level of smartphone contract upgrades in the fourth quarter, with more than 9% of customers upgrading. Combined with sales of other smartphones, he said that the upgrade performance "bodes well for the business where iPhone is not exclusive."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed . His e-mail address is mhamblen@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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